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China Steel Commodities Rebound

Commodity futures linked to China’s vast steel sector rebounded sharply on Friday, led by iron ore and rebar, as robust construction demand spurred buying even as the country’s regulator ordered exchanges to rein in speculative trading.

Big bets on Chinese commodities futures this year from hedge funds, retail investors and others have driven up contracts on everything from iron ore to cotton, prompting many analysts to warn of parallels with a boom in China’s stock markets that ended in a sharp crash last summer, Reuters reported.

Rebar, a construction steel product, also posted its biggest monthly rise ever, with volumes in the most-traded contract in Shanghai hitting a record 1.4 billion tons—enough to build San Francisco’s Golden Gate Bridge more than 15,000 times over.

Friday’s bounce, largely limited to ferrous futures, was backed by firm fundamentals, analysts and traders said, as steel demand in China continued to benefit from a seasonal pick-up.

The recovery comes as China’s securities regulator ordered the country’s major commodity futures exchanges this week to control speculative trading, sources told Reuters.

In response, the exchanges in Dalian, Shanghai and Zhengzhou told major institutional investors that lack a commodities background to rein in their trading, three people with direct knowledge of the situation said.

All three exchanges have launched a series of measures this week to curb speculation, including higher transaction fees, some of which have been increased more than once.